Eversheds Digital Banking Seminar

Obtaining the right technology

30 September 2015

Eve England

Principal Associate

Eversheds LLP |

−Why is obtaining the right technology important?

−Digital platforms - investment and strategy−Facilitating innovation−Getting the contract right−Maintaining a competitive edge

Overview

Eversheds LLP |

−Institutions focus on Digital Banking in a customer focused manner

−However, without the right technology and the right supply contracts, the end product may fail or be non-compliant

−My session looks at obtaining the correct technology in the most efficient way

−To avoid failure, we advocate a “holistic” approach between the Bank's innovators, procurement professions and regulatory and sourcing lawyers

Why is this important?

Gough, Partner

Eversheds LLP |

The UK banking landscape is changing, and a far greater emphasis is being placed on mobile banking and a general move towards innovative customer engagement initiatives

−Legacy systems• A particular challenge for established banking institutions• Consideration of existing IT infrastructure strategy• Adapting old systems via change control or new cutting edge

systems? A mixture of both?

−New entrants• Ability to consider innovative solutions as a starting platform• Funding to invest in expensive technologies? • Lack of established risk and compliance frameworks

Digital platforms – investment and strategy

Eversheds LLP |

It is important that financial institutions consider approaching IT strategy in an holistic manner

−Innovators & tech teams• What is the digital solution being sought?• Is the technology relevant - market testing / customer focus groups• What is the impact on existing models/procedures?• Extent of work needed to implement?• Expertise needed?

−Sourcing professionals• Costs to the business• Engaging the operational and business teams early• Choosing the best supplier• Negotiation with more than one supplier

Facilitating innovation

Eversheds LLP |

−Legal & compliance teams• Commercial contract specialists/technology lawyers• Product teams (retail and commercial)• Regulatory lawyers – can you provide the model within the relevant

regulatory environment and within the financial institution’s risk appetite?

−Using the right contract• Waterfall v Agile

• Waterfall – platforms• Agile - Apps

• Consider testing and implementation requirements• Using multiple third party providers• Do you need a systems integrator?• Consider how the contract will be ultimately managed

Facilitating innovation (cont’d)

Eversheds LLP |

Once the internal approach has been confirmed, it is then necessary to ensure that your contract provides the necessary framework for delivering the relevant innovation.−Detail clearly what you expect from your supplier−Focus on how the project will be delivered and make the contract as

practical as possible −Try to avoid change control costs and disputes later on−What level of implementation and testing is needed?−Consider assumptions and dependencies, although take care to

avoid deadlock

Getting the contract right

Eversheds LLP |

−Encouraging good performance • Consider the practical ways you can look to encourage a good

working relationship with your supplier • Service levels

• Take care when agreeing service levels • Shift to 24/7 banking • Instant functionality

• Gain shares• Other innovative incentives?

−Good governance throughout the contract term will be key

Getting the contract right (cont’d)

Eversheds LLP |

This section sets out some of the key contract provisions that will need to be included in any contract with your suppliers

−Regulatory compliance • Does the contractual framework allow you to be compliant from a

regulatory perspective?• Involving appropriate product teams –retail/commercial• Are your risk teams comfortable with the document?• Audit rights?

−Does the supply involve a material outsourcing?• Are the principles of SYSC 8 captured?• Do you have sufficient control over the supplier?

Getting the contract right (cont’d)

Eversheds LLP |

− Protecting customer data• Balance between the legal framework and delivering a good

customer journey• Future proof the provisions

−Liability• Have you included a robust and precise liability framework?

Getting the contract right (cont’d)

Eversheds LLP |

In the new digital era, maintaining a competitive edge remains a constant challenge.

−Flexibility - Focus on ensuring that your contract has a sufficient degree of flexibility built into it• Software updates• Encouraging innovation throughout – product enhancement requirements• Utilising change control procedures• Specifying upfront how regulatory changes etc. will be managed and specify

which party will be liable for the costs of implementation

−Exclusivity & IPR• If you are developing cutting edge systems, consider the need for periods of

exclusivity.• Will you want to own the IPR or will licencing provisions suffice?

Maintaining a competitive edge

Eversheds LLP |

No team is an island!

Summary

Questions?

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Principal Associate

Eve England

+44 782 798 7823eveengland@eversheds.com

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